I'm so sorry to hear of the loss of your dear friend. I'm sure that her children will be thrilled to each have a quilt that she made, even though she didn't get them done. While you're finishing them up, remember the good times that you both had, but please don't linger on the fact that she's gone. I know that sometimes it's a very painful disease, so I would think of it this way, at least she's not in pain any longer.
I'm sure that once the members of the board know what you were going through, that they'll be very understanding of why you hadn't followed through on your commitments.